Wall Street Recovers, Dollar Steadies As Trump Tempers Trade Fight, Signals Support For Powell: This Week In Markets

Investor risk appetite rebounded over the week as the U.S. administration signaled a de-escalation in trade tensions with China. President Donald Trump also reassured markets that he has no intention of firing Federal Reserve Chair Jerome Powell.

Reports suggested China is considering suspending its 125% tariff on select U.S. imports, following indications that Washington may cut tariffs on Chinese goods. Trump hinted that negotiations with Beijing are ongoing, even as Chinese authorities denied any such talks were taking place.

The sell-off that had weighed on U.S. Treasuries and the dollar the previous weeks came to a halt, as investors found reassurance in the central bank's independence.

The S&P 500 has now recouped nearly 80% of the losses suffered since the post–April 2 "Liberation Day" downturn.

Yet, recent business and consumer surveys paint a less optimistic picture. U.S. private sector growth slowed in April to its weakest pace in 16 months, according to flash Purchasing Managers' Index data.

Business expectations for the year ahead have dropped to near-COVID-19 pandemic lows, while prices for goods and services rose at the fastest pace in over a year, particularly in manufacturing, where tariffs are playing a key role in driving costs higher.

Consumer sentiment also deteriorated sharply. The University of Michigan's gauge fell 8% this month, with expectations down 32% since January — the steepest three-month drop since the 1990 recession. One-year inflation expectations surged from 5% to 6.5%, the highest since 1981, while long-term inflation expectations rose from 4.1% to 4.4%.

Among individual stocks, ServiceNow Inc. (NASDAQ:NOW) led the S&P 500 with a 20% weekly gain on strong earnings and upbeat forward guidance. In contrast, Northrop Grumman Corp. (NYSE:NOC) fell 15% after cutting its 2025 outlook.

Tesla Inc. (NASDAQ:TSLA) posted its biggest weekly rally since early November 2024, despite underwhelming earnings. Investors cheered Elon Musk's pledge to reduce his involvement in Dogecoin and refocus on leading the EV company.

Looking ahead, macroeconomic data and earnings will dominate the headlines next week.

Four members of the Magnificent Seven will report earnings next week, with Microsoft Corp. (NYSE:MSFT) and Meta Platforms Inc. (NASDAQ:META) set for Wednesday, followed by Apple Inc. (NASDAQ:AAPL) and Amazon.com Inc. (NASDAQ:AMZN) on Thursday.

Thursday brings the release of the advance estimate for first-quarter GDP and the Fed's preferred inflation gauge for March, followed on Friday by the closely watched April jobs report, offering fresh clues on how tariffs are affecting the labor market.

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